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Don’t Mix Your Politics With Your Portfolio

Don’t Mix Your Politics With Your Portfolio

Posted On October 16, 2020 3:38 am
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By Ben Carlson

With the presidential election just weeks away, you can expect to be inundated with predictions about how the winner will impact the markets and the economy. It may be entertaining to guess how the outcome of the election will impact your wealth, but this becomes a futile exercise once you realize how much there is that we don’t know about what comes next. Not only do we not know who is going to win but also:

  • We don’t know which policies they’re going to implement while in office.
  • We don’t know how amenable the other party will be to those policies.
  • We don’t know how the person in office will impact consumer spending and sentiment in the economy.
  • We don’t know which sectors or industries will be the biggest winners and losers.
  • We don’t know how investors will react or what they have already priced in regarding the outcome of the election.

When Trump got elected, there were pundits and investors galore predicting an enormous market crash. Instead, stocks rose steadily for most of his first term until the pandemic hit. There have been more than 130 new all-time highs on the S&P 500 during Trump’s tenure.

When Obama got elected, there were people predicting, “[His] Radicalism Is Killing the Dow.” Instead, stocks set off in 2009 on a bull market that lasted for the entirety of the next decade. There were nearly 130 new all-time highs on the S&P 500 during Obama’s tenure. The long-term trend of the stock market has been up and to the right no matter who the President is:

And no President in modern history has been able to prevent the stock market from falling either:

Every President going back to Herbert Hoover has experienced down markets. We also don’t know who will hold a majority in Congress coming out of the upcoming election. The promises candidates are making on the campaign trail right now won’t necessarily come to fruition if they don’t control Congress. The performance of stocks also varies depending on who controls what historically:

The truth is politicians have far less control over the stock market than most people would like to believe. Policy outcomes often show up on a lag and come with unintended consequences. As we’ve seen this year, the economy and the stock market are not always on the same page. It might give you an illusion of control to know your party holds the nation’s highest office, but no one person is bigger than the stock market.

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About author

Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I'm a proud co-founder of Wide Moat Research, Dividend Kings, and the Intelligent Dividend Investor. My work can be found on Seeking Alpha, Dividend Kings, iREIT, and the Intelligent Dividend Investor. My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives. With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams and achieving long-term financial goals.

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